Japan Starts to Recharge After Two Lost Economic Decades

Re:Japan Starts to Recharge After Two Lost Economic Decades by cromwellian on Monday May 20, 2013 @12:41AM (#5735930)

By "monetary policy ineffective" they mean slashing interest rates. Keynesians have been saying for a long time that the only effective monetary policy in a liquidity trap is to cause people to credibly believe you are raising the inflation rate.

It's not really surprising at all, Ben Bernanke and Paul Krugman have basically been calling for this (in Japan) for over a decade.

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Re:Japan Starts to Recharge After Two Lost Economic Decades by bdcs on Monday May 20, 2013 @06:15AM (#5736824)

To expand further, lowering interest rates at the ZLB doesn't do anything because people will hold money rather than deposit it at a nominal interest rate at or below zero. Hence, central banks must buy assets: treasuries in the case of the Fed and JGB/ETFs in the case of BoJ. Buying assets is effective at the ZLB, according to Keynesians anyhow.

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